If you’re a homeowner and haven’t faced a huge repair bill yet, just wait. Even in the best-maintained homes, items will wear out or break.
Budgeting for these inevitable bills isn’t always easy. A commonly cited rule — to save 1% to 4% of your home’s value each year for maintenance and repairs — can deal sticker shock to homeowners as real estate prices rise.
Accredited financial advisor Kate Militz recently purchased a home in Olympia, where the average listing price is $540,000, according to Realtor.com. Saving 1% of this, or $5,400, would be a stretch for many owners, says Mielitz, who advises lower- to middle-income clients. A 4% savings would mean setting aside $21,600 per year.
“I want to cry seeing that number,” Miletz says.
The cost of the house depends on the age, condition, climate
However, rules of thumb have limited value, says John Wesling, president of the American Society of Home Inspectors, because how much you spend often depends on the age of the home, the materials used, and local climate patterns.
For example, in St. Louis, where the Weaslings live, a laminated-shingle roof can last 35 to 40 years. But it can survive less than 15 years under Florida’s harsh sun, he says. Extreme weather events can wreak havoc on homes as well.
Wesling says that how well you maintain a home can also have a big impact. For example, many homeowners don’t notice window sills that dry out and split, but water that seeps in can cause huge damage.
“What might have been a $12 or $15 repair could turn into spending $15,000 or $20,000 to rebuild the wall under the window,” Wesling says.
According to the latest US housing survey conducted by the US Census Bureau, homeowners spent an average of $950 – or 0.6% of the home’s value – on home maintenance in 2019. But amounts vary greatly depending on the size and age of the home, among other factors. For example, the percentage of home value spent on maintenance increased from 0.2% for homes built in 2010 to 0.8% for homes built before 1960.
deciding how much to set aside
People who choose to hire others should expect to spend more than those who do themselves, says Misha Fischer, chief economist at home services referral website Angie. Fisher says Angie’s survey of 2,934 homeowners who paid for home improvements last year found they spent an average of $3,018 on home maintenance. Those amounts are typically between 0.5% and 1% of the value of their home. In addition, homeowners spent an average of $2,321 on emergency repairs.
Fisher recommends homeowners up to 5% of their income for home maintenance, as well as up to $10,000 to cover emergency repairs and system replacement.
Another approach is to save based on the remaining life span of the various components of your home, including the roof, heating and cooling systems, hot-water heaters and appliances.
Wesling says you can search online for charts and articles that estimate how long an ingredient lasts. Similar searches can give you an idea of replacement costs.
Alternatively, hire a home inspector to conduct a home-maintenance inspection, Wesling says. Like inspections that happen prior to a home purchase, a maintenance inspection can predict when various home systems will need to be replaced. Wesling says he typically charges $400 to $500 for an inspection.
Let’s say you have an air conditioning system that’s 5 years old, which typically has a life span of 15 to 20 years, Wesling says. If a new system will cost $4,000, you can save $400 per year to cover it. You can add a fudge factor to future inflation, which, unfortunately, is unpredictable. Wesling suggests adding 20 percent to your savings to the estimated cost plus an additional $100 a year.
Other ways to prepare for household costs
Consider setting up a home equity line of credit that you can tap if the repair bill exceeds the amount you’ve saved. These lines of credit are less expensive than many alternatives such as credit cards. Just Make Sure You Can Pay: If you don’t, the lender may foreclose on your home.
Those who struggle to save can also consider purchasing a home warranty, which can cover repairs and replacements for home systems and appliances, Militz says. Its warranty costs about $800 per year, while service visits to fix any problems cost $75 each.
Such contracts have their disadvantages: for example, the customer does not control who performs the repairs, and what is covered depends on the terms of the policy. Consumer Reports recommends that people “self-insure” the money they spend on home warranties rather than putting them into a savings account set aside for home repairs and replacements.
This column was provided by personal finance website NerdWallet to The Associated Press. Liz Weston is a certified financial planner and a columnist at NerdWallet, author of “Your Credit Score.” Email: email@example.com.